Medicare is a generation transfer system designed in the 1960s to provide health care delivery coverage, and forms the biggest federal spending. In this program, services are provided on a ‘pay-as-you-go’ basis where workers pay a payroll tax to fund the Medicare expenses. This system is funded through payroll taxes, premiums and public subsidy.
Medicare Part A is a government funded hospital insurance that covers hospital inpatient services to certain people who qualify. This involves a 20% co-payment or coinsurance for some services. For one to qualify for Medicare, one has to have paid a certain amount of taxes and earned a particular number of ‘credits.’ People born after 1929 needs forty ‘credits ‘of which one can only earn a maximum of four per year.
The amount of money needed for one credit varies from year to year. For people born before 1929, one credit is subtracted from each year before 1929. Services covered in part A include the cost of blood after the third pint in a calendar year; home health services that is, services ordered by the doctor if one experiences great difficulty in leaving home for the hospital. This covers the first 100 visits after leaving the hospital.
It includes services such as physical therapy, speech and language pathology, occupational therapy, physical therapy, home aide services, medical supplies and equipment, medical social services, hospice care for people with terminal illness and doctor certified to live for only six or less years; hospital stay in a semi private room and the services related excluding doctors pay; and skilled nursing facility care for up to 100 days (Fruits 2009). This part generates its fund from payroll taxes levied on employers and employees with input amounting to 2.9% of payroll.
Medicare part B is a medical insurance service funded by the government and covers expenses not covered in part A. These include out patient care, doctors visits and some preventative services, however, one must be enrolled for part A in order to enroll for part B. This is available to persons over 65 years who receive social security or retired rail road board benefits, individuals under the age of 65 who are disabled and those with Amyotrophic lateral sclerosis.
Medicare Part D covers prescription drugs and is available to everyone with Medicare. It is provided by insurance companies as a separate coverage or through Medicare advantage plan. The cost for this part varies. A monthly premium is paid including the part B premium (Coulam and Gaumer, 1991).
In 2009, the costs of funding the Medicare part A was $246 billion while that of Medicare B was $203 billion and Part D $63 billion. The total amounts to 3.6% of Gross Domestic Product. This program is expected to consist of 8.7% of U.S GDP by 2050.The Medicare program has an uncertain future in that it is funded from a pool of funds raised principally through FICA withholding on payroll. The financial equations of the funding system have changed since the fund was created, and more money is required to sustain it due to demographic changes and rapidly rising health care costs. The system requires change in the way it is funded, by incorporating it to the general federal budget and be among the priorities as it is important to majority of Americans who need assistance for health care insurance (Coulam and Gaumer, 1991).
Projections for the long run costs of the program are not sustainable. The 2009 hospital insurance fund is expected to be raised by redeeming assets. The Hospital Insurance Trust Fund is projected to be exhausted by 2017 with benefits payable from tax income declining to 81% in 2017, 50% in 2035 and 30% in 2080 according to a summary of 2009 annual reports by Social Security and Medicare Boards of Trustees (Fruits 2009). The Medicare Part B and Part D are projected to be sustainable indefinitely as the law provides that financing each year to meet the next year’s forecast costs.
Reference list
Coulam, R.F. & Gaumer, G. L. (1991). Medicare’s prospective Payment System: A Critical Appraisal. Health Care Financing Review, pg. 45,33.
Fruits, E. (2009). Funding Medicare: An Analysis of Private Accounts. Portland, Cascade Policy Institute. Web.